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REAL ESTATE OWNERSHIP FOR COMMUNITY BASED HEALTH CENTERS
Tom Ruge , Director- Lewis & Kappes
Emily Najem, Associate-Lewis & Kappes
317-639-1210
www.lewis-kappes.com
OUTLINE
Purchase Considerations Holding Entity Purchase Process Property Tax Exemption Takeaways
REAL ESTATE PURCHASE CONSIDERATIONS
Landlord v. Tenant Financial Considerations Expansion Options Renting to Third Parties Entity that will own property Operations Hiring a Broker Comps Tax Costs
HOLDING ENTITY
LLC 501(c)(2) Title Holding Company Health Center
LLC Formation
Resolutions from Health Center Entity Authorize formation of LLC Operating Agreement Election of Managers Establish bank account Treated as Disregarded Entity Purchase Real Estate Lease
Articles of Incorporation Operating Agreement
Single Member Purpose-to operate for the sole benefit of the sole member by holding title to the
property for the benefit of the sole member Operation-intent to operate the LLC as a single member entity; treated as
disregarded entity Managers
Positions within sole member board
Maintain Separate Legal Entity Single purpose entity
Only asset is the real estate Separate bank accounts Separate meetings of governing body
LLC
Benefits Reduce risk
Property Injuries Mortgage Debt Environmental Risks
Only LLC’s assets at risk Additional layer of protection
Costs Maintain corporate formalities Filing costs
501(C)(2) TITLE HOLDING COMPANY Provides a tax exemption for title holding companies Formation
Articles of Incorporation Bylaws Lease
Qualifications Owned and controlled by exempt organization Exclusive purpose is to hold title to property, collect income from the
property and remit entire amount of income minus expenses to exempt organization.
Prohibited from engaging in any other business Benefits
Assists with real estate exemption Reduces risk
Costs Must apply to IRS for exemption Lengthy process Formation Costs
PURCHASE PROCESS
Letter of Intent Purchase Agreement Due Diligence Period Funding Closing
LOI AND PURCHASE AGREEMENT
Board Approval Buyer Resolutions Seller Operating Agreement/Bylaws Purchase Agreement Terms
Earnest Money Due Diligence Period and Review Request Due Diligence Items from Seller Seller Covenants Property Taxes Occupancy Broker Commission Warranties Financing Contingency
DUE DILIGENCE
More than 30 days Appraisal Inspection Phase I Survey Zoning Letter
All tenants Seller Account Receivables Tenant Leases
Estoppels Seller searches
Judgement and Lien Searches UCC searches
FUNDING SOURCE Bank
Review Commitment Letter Items Required
Purchase Agreement Organizational Documents EIN number Bank account Payoff letter Resolutions Insurance
Loan Documents Review carefully Hazardous Substance
Guaranties Limited
Assume Loan Grant
Source and use requirements
TITLE & CLOSING Title Insurance
Endorsements Remove standard exceptions
Payoff Letters Upon payment release liens
Settlement Statement Security deposit(s) Pro-rate rent Pro-rate taxes
Seller Resolutions Insurance Utilities Assignment of Leases Personal Property Purchase
Bill of Sale Vehicle Titles
PROPERTY TAX EXEMPTION APPLICATION
Owner entity to apply Deadline: May 15th Supporting documentation and analysis
Entity formation documents Exempt entity documents Financials Analysis of exempt purpose and qualifications
Issues related to third party tenants Municipal, charitable, educational or religious
purpose? Percentage of exemption
TAKEAWAY TIPS
Tight Purchase Agreement Due Diligence Picking a bank Timeline Budgeting
QUESTIONS
317-639-1210 www.lewis-kappes.com